New World Bank research suggests discrimination toward the lesbian, gay, bisexual and transgender community is costing India billions of dollars.

Homophobia in the workplace in India and lost productivity as a result of discrimination are among some of the findings in a report by U.S.-based economist M.V. Lee Badgett that is part of an upcoming study for the World Bank. Ms. Badgett’s study also looks at how homophobia triggers high rates of depression and suicidal behavior, which can also affect the economy.

With this, Ms. Badgett estimates that homophobia cost India’s economy between 112 billion rupees ($1.9 billion) and 1.7 trillion rupees ($30.8 billion) in 2012. To put that figure into context: India lost between 0.1% to 1.7% of its potential gross domestic product that year.

Ms. Badgett is the director of the Center for Public Policy and Administration at the University of Massachusetts Amherst, as well as a professor of economics. Ms. Badgett spoke to The Wall Street Journal about her preliminary findings, the methodology behind her research, and why she believes the economic impact of homophobia is even greater than what she estimates.

Edited excerpts:

The Wall Street Journal: Why pick India as your case study?

M.V. Lee Badgett: It’s a country where there is a movement for LGBT rights and there are many organizations created by LGBT people. Also, there’s data, not a lot, but some, mainly through HIV/AIDS-related research, which gave me something to work with when I was trying to come up with some quantifiable estimates.

But homophobia exists in every country in the world, even those with formal equality where, for example, same sex marriage is legal. So this study uses India as a case study but its findings of economic costs could be applied to any country.

WSJ: How did you arrive at the figure of up to $30.8 billion?

Ms. Badgett: In short, I calculated the estimated lost wages of LGBT people in India. I had to draw on data on LGBT discrimination measured as gaps in labor market earnings by sexual orientation in Europe and North America because it doesn’t exist for India.

Second, the research on health shows that rates of depression, suicidal thinking and HIV/AIDS are much higher among Indian LGBT people than the general Indian population. Healthier workers are more productive, so higher rates of illness for LGBT people reduce their ability to contribute to economic output. Health disparities also generate extra healthcare costs.

The highest end of the range of estimates for the two pieces together put the cost at $30.8 billion.

WSJ: What was your reaction when you first arrived at that number?

Ms. Badgett: I was surprised at how big the loss to India’s economy could be. But we have other studies showing that the exclusion of certain groups of people is costly. There’s a whole area of research that shows the exclusion of women is very costly to economies. So my findings fit into the larger context of thinking about the importance of inclusion for economic growth and suggest our economies would be much stronger and vibrant if we had less prejudice and discrimination against many different groups of people.

WSJ: Why does your study focus only on the costs incurred by homophobia at work and disparities in health?

Ms. Badgett: That choice was completely driven by the availability of data. For example, there is very little information about the experience of LGBT people in India in the education system. What does exist suggests that LGBT people face very big barriers to gaining access to educational services and being able to stay in school and college. But this was not incorporated into the study since I could not quantify it, unfortunately, despite it being extremely important from an economic prospective.

There is a section of the global tourism industry that caters directly to LGBT people, and the situation in certain countries like India might discourage people from going there whether they are LGBT or heterosexual. I think the impact of tourism could be very important.

Other kinds of costs that are not in the study include the brain drain cost; people leaving India because of the stigma of being a LGBT person. There’s also a cost to family members, who can often be stigmatized because a relative is a sexual or gender minority. So there are lots of things I cannot take into account. If I could, it would simply add to my estimate and make it larger; that’s why I believe my numbers are conservative.

WSJ: India’s Supreme Court in December reinstated a law against gay sex. Is the law likely to have a lasting, negative impact on India’s economy?

Ms. Badgett: Research suggests that the criminalization of gay sex in India has created problems for LGBT people that are likely to reduce their contributions to the economy. Those laws have contributed to harassment of LGBT people by police, motivated violence and extortion against LGBT people, made it more difficult to prevent and treat HIV/AIDS, and justified other forms of discrimination.

WSJ: What impact would you like your report to have once it is released?

Ms. Badgett: I hope the report generates awareness of the issue, which can then lead to discussions on what can be done to address exclusion caused by homophobia.

Generally, discussions about LGBT human rights have focused on expressing values related to respect and equality. This study gives a different perspective on what other motivations there might be for countries topromote LGBT rights, and arguing it is costly to exclude them could be a powerful reason for people who don’t see human rights as important. It’s a potentially powerful argument if you are mainly concerned about economic development.

Atish Patel is a multimedia journalist based in Delhi. You can follow him on Twitter @atishpatel.

About India Real Time

India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.